In case you haven’t noticed, there’s a bull market in stocks. Our particular interest in this essay is U.S. stocks, for which the S&P 500 is the oft-quoted benchmark. By that measure, the recent past has been good if not spectacular.
Through yesterday, the S&P 500’s total return for the past year is a nifty 12%, comfortably above the long-term average of around 10%. For the past three years, the annualized total return isn’t quite as strong, but tidy nonetheless at 9.7% a year, according to Morningtar.com.
The market’s rise has been warranted based on the surge in corporate profitability, which has of course translated into earnings growth. In fact, the earnings growth has been extraordinary. As outlined this morning by Bob Doll, chief investment officer for Blackrock, S&P 500 earnings have advanced at a double-digit pace for each year starting in 2002. Once the final numbers are in for 2006, Doll believes that S&P operating earnings will climb by 18%, he explained today at a press conference in New York, where yours truly was in attendance.